Friday, 1 September 2017

What’s next? – GOLD, OIL 01.09.17

Gold futures were higher in Asian early hours on Friday, extending gains as demand for safe havens recovered.

On the Comex division of the New York Mercantile Exchange, gold futures were trading 0.23 percent or $3.10 down at $1,325.30 a troy ounce as of 04:10 GMT.

The yellow metal settled in green territory on Thursday at $1,323.26, as the dollar’s recovery came to an end following the release of downbeat inflation data and as geopolitical tensions increased demand for safe-haven assets.

The core PCE price index saw a 1.4 percent growth rate in July, marking the weakest year-over-year advance since December 2015. Inflation data is a key metric for the Federal Reserve to justify further monetary policy changes, such as interest rate moves.

According to Fed funds tracked by CME Group’s FedWatch program, market participants are currently pricing in a 36 percent probability of a 25 basis points interest rate hike by December.

In a separate report, the US Commerce Department said personal spending rose by 0.3 percent in July, a tick below analysts’ expectations but above a previous reading of 0.2 percent. Pending home sales fell 0.8 percent in July against an initially forecasted 0.5 percent increase.

Labor market data was also in focus, with the number of people claiming for unemployment benefits rising by 1,000 from a previous week 235,000, but below an expected move to 237,000.

These reports came in only a day before fresh employment data is released, and which could play an important role at defining the future of US monetary policy in the near future.

Average hourly earnings, nonfarm payrolls and unemployment rate for August are expected for release at 12:30 GMT. Analysts are forecasting a 185,000 jobs build.

Also, Markit Economics will present its manufacturing PMI at 13:45 GMT. The ISM will release its own manufacturing PMI at 14:00 GMT and Michigan University consumer expectations and sentiment are due for publishing by the same time.

Geopolitical tensions in the Korean peninsula ramped as South Korea and the US conducted new joint military exercises in response to the North Korean missile that flew over Japan.

OIL

Oil futures dropped in early trading Friday, giving up gains from the prior session as nearly a quarter of America’s refining capacity is shut down due to the ongoing tropical storm Harvey.

The US West Texas Intermediate crude futures traded 0.59 percent lower at $46.95 per barrel as of 04:15 GMT, while the London-based Brent contracts on the ICE Futures Exchange in London were down 0.21 percent to $52.75 a barrel.

Meanwhile, US gasoline for September delivery was trading at 1.7729, down 35 percent but still close to a two-year peak.

According to local media outlets, ex hurricane Harvey has costed the lives of at least 35 people. Key refineries were forced to suspend operations until climate conditions improve. Exxon Mobil’s plant suffered some damages due to heavy flooding.

About 13.5 percent of crude production capacity in the Gulf of Mexico is now offline, reported the US Department of the Interior's Bureau of Safety and Environmental Enforcement.

Earlier this week, the US Energy Information Administration said crude inventories declined by 5.392 million barrels in the week ended August 25, much more than the estimated 1.9 m drop.

A survey conducted by Reuters showed that oil production of the Organization of the Petroleum Exporting Countries (OPEC) was down by 170,000 barrels per day in August.

Ahead in the session, traders will pay close attention at Baker Hughes weekly oil rig count at 17:00 GMT. Last week, the oilfield service company reported a second straight weekly decline.